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Standing Committee on Infrastructure, Transport and Cities
Australian government's role in the development of cities

NEWTON, Prof. Peter, Research Professor in Sustainable Urbanism, Centre for Urban Transitions, Swinburne University of Technology


CHAIR: I now welcome Professor Peter Newton to give evidence today. Although the committee does not require you to give evidence under oath, I should advise you that the hearing is a legal proceeding of the parliament and, therefore, has the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I now invite you to make an opening statement before we proceed to discussion.

Prof. Newton : My name is Peter Wesley Newton. I am a research professor in the newly established Centre for Urban Transitions at Swinburne University of Technology, and also have significant roles in the three urban cooperative research centres that currently exist but may not in the future under the current CRC guidelines, where cities and urban do not seem to feature as a focus for future CRCs. That may be something we can discuss.

I would like to thank the committee for the opportunity of coming here to speak with you today. The focus of my submission has been on a number of the key transitions that I believe are required to deliver more sustainable urban development in our fast-growing cities. Principal among these is increasing housing supply in the well located established inner and middle ring suburbs of our cities. It will require an urban transition from low density suburban cities to more urban compact cities achieved by redirecting population growth and property investment inwards from the greenfields to urban infill, the brownfields and what I call the 'greyfields'.

There also needs to be a transition in the type and scale of new infill housing development. What I mean by that is medium density is the type that needs to increase, and at a precinct scale. This has come to be termed the missing middle, medium density at a precinct scale in the middle suburbs. In this context there needs to be less piecemeal, suboptimal knockdown/rebuild housing, which currently dominates the greyfield infill and is really contributing to cities not meeting their infill targets. Some cities have an infill target, which is a really positive step in terms of trying to limit greenfield development.

The transition also needs to be regenerative where the new development does not continue to add to the world-leading ecological carbon and urban footprints that characterise our cities but provides pathways to shrinking those footprints. To achieve this, the transition needs to accommodate new distributed infrastructures in renewable energy generation and also decentralised water and wastewater treatment. This is presenting a major problem for governance for the regulated government agencies that manage the centralised energy and water operations for our cities. There is a significant potential there, but there is a governance issue to address.

New zoning schemes are also required that more accurately target where intensified redevelopment should take place within our existing established cities, akin to what I would ascribe to precision surgery within medicine. It requires better diagnostics, prescribing more accurately what intervention is needed, where and when, and better methods of engagement with the clients. That is an analogy with the medical profession that is much more advanced and points to where we could go in terms of city planning.

At the moment, zoning schemes are locking up a massive amount of property with high redevelopment potential that needs to be regenerated. The question is how to free that up to meet the infill targets. New community engagement processes are also needed to empower citizen-led redevelopment projects among neighbouring private property owners in the established greyfield suburbs—more bottom-up activity. There are signs that this is possible, but it is a matter of how you scale up and accelerate this process within the planning framework of the state government directions and also local government.

In conclusion, it is encouraging to see a growing interest at the federal level in cities by both sides of government after a gap of 20 years since the Hawke-Keating government. The Building Better Cities Program that operated between 1991 and 1996 addressed a common set of national urban challenges of that era and left a lasting legacy in the form of a development model—a new development model at that stage—that has continued for brownfield precinct redevelopment. Prior to that, basically you had the brownfields that were just sitting idle in strategically important places.

I think the challenge for a much smaller smart cities and suburbs program is to make an equivalent impact and leave a legacy for urban planning and development in the established greyfield suburbs. My submission goes into a number of the aspects of infill/regeneration. I might leave my opening statement at that. I am happy to participate in discussion.

Ms BIRD: Thank you. Interestingly, you talked about precision intervention. Yesterday we met with the council, and they were talking about the process they went through with I think 7.5 per cent opportunity of redevelopment which was along transport corridors and only a block back to the laneways. It was that sort of model. That was at a minimum potentially providing a million extra—

CHAIR: It think it was 2.4 million.

Ms BIRD: That was the top end.

CHAIR: That was on the high end.

Ms BIRD: It was between a million and 2.4 million of additional capacity in the city. Is that the sort of thing you are talking about, and how would you see the federal government playing a role in advancing such a model?

Prof. Newton : In terms of regeneration—higher density regeneration in the greyfields—they are the ageing, established, physically and environmentally poorly-performing housing areas of our cities where the majority of the value is in the land rather than the built asset. My research demonstrates that once 70 per cent or more of the value is in the land it gets redeveloped. Typically it is knocked down and rebuilt, unless there is some planning zoning prescription that encourages something different than knockdown and rebuild at one for one, two for one or at best, four for one, under current building and planning regulations. You have essentially activity centres and transit corridors as the two elements of current city planning strategies in most of the large cities that attempt to concentrate/intensify development in those areas.

The research that I have been doing for the last seven years on infill demonstrates that they are both necessary but they are not sufficient conditions or instruments to deliver the infill that the large cities are requiring. You have Adelaide with an 85 per cent infill target. You have Melbourne and Sydney at around 70 per cent. South-East Queensland is about 60 per cent. Perth is 47 per cent. Even Perth is way short of its 40 per cent. All of the cities are struggling to meet their targets; in fact, most of the development is still in the greenfields.

The focus for the research that I lead is trying to direct development inwards not just into the activity centres and the transport corridors but also the areas in between, which are ageing and where you just have piecemeal development. The challenge is how do you enable lot consolidation in those areas away from those transit corridors that are still close to schools, education facilities and other services that characterise the inner and middle suburbs. They are extremely well located, but they are underperforming in terms of being able to be redeveloped/regenerated. Not just with housing yield but also in other dimensions, in terms of lower energy demands on the centralised system, lower water, better ways of managing your waste, particularly food waste, and maybe encouraging car sharing, if you can get that going, in areas that have higher thresholds of population. A number of these things do not kick in until you reach a certain threshold of population. The focus is on medium density, not high-rise, in these areas. It has to be sensitive to the context in which the development should be taking place. The challenge for urban designers is to provide a new vision of what a new urban character could be for these areas.

These areas change. If you go back 10 years in some of these protected neighbourhood residential zones or general residential zones, there is phenomenal change as a result of this piecemeal development, but they tend to be producing more problems than they are solving. They are not giving the yield. Trees are almost being entirely removed. There is a real problem down the track for urban heat. Cars are not being limited. You are getting additional car spaces. How can you make these substitutions?

For the last seven years, with AHURI, CRC and state government funding we have been focusing on greyfield precinct regeneration. The state government understands that this is an area that needs to be engaged with. As a result of the research that we have been doing, there is now a planning policy directive in Plan Melbourne 2017-2050 that relates to greyfield precinct renewal. It is this strategy, which is providing signals to local governments that they should be becoming more active in this area.

To get back to your second issue of local government, they are really in the front line in this urban change intensification, but their capacity to respond is not where it needs to be. Reference has been made to vertical fiscal imbalance and all of these terms, lack of vertical integration between state and governments. It is a matter of how you get the capacity into local governments to enable them to play a significant role.

Ms BIRD: Do you see the federal government being able to assist in that way?

Prof. Newton : Yes. I made reference to the Building Better Cities Program that was led by Brian Howe. I was involved in that process and saw the benefits of what happened in terms of the brownfields. There was a significant injection of federal money. I think $800 million was the federal injection for Building Better Cities. It enabled the coming together of the three tiers of government in a new way, as well as the private property sector. That is the combination that needs to be brought together. It was a success and we now see the results of this.

You can argue about the quality of the brownfield precinct redevelopment. I would direct your attention to the Ideas for Fishermans Bend report that emerged as a result of the CRC for Low Carbon Living and the CRC for Water Sensitive Cities coming together to do a research synthesis on Fishermans Bend and to find a blueprint for the government agencies and the developers as to what is possible in terms of delivering low-carbon buildings in a water-sensitive context.

For the federal government, you have the Smart Cities and Suburbs Program. It is a much smaller program than Building Better Cities, and there are a number of areas where you can apply to bring the partnerships together, which we have done with local government, state government and some other partners in this greyfields area. We will see what happens as a result of what investments are made into those programs in terms of what it can uplift. I suspect the main target is local government. They need to be the leaders in this area. Whether there are multiple areas of focus that mean that you may not really be achieving some significant outcomes unless you begin to follow up, I do not know. I have not discussed the program—

Ms BIRD: You raised the issue of capacity, which has been raised with us previously, particularly when we were in Sydney. A number of organisations raised the fact that to some extent we were calling on local governments because you want a bottom-up driven process, but their capacity to be putting this sort of proposition together is variable, even across the 22 cities that are listed in the cities program. You are talking about your own organisation, such as CRCs, having some capacity. How much of your funding allows you to work in partnership with local government and what other things could we look at doing to build capacity in local government? I just worry there will be a divide between those cities that have all of those resources and capacities and will jump on and go ahead and those that do not.

Prof. Newton : You always have a distribution of leaders, fast followers and those that lag. The challenge in all of these areas is to see if you can move up that curve. We have chosen to work with municipalities that kind of 'get it' in terms of this jump. It is an area that potentially could have something of a backlash within local government, because most councillors go to elections with words such as, 'We will prevent overdevelopment and we will protect neighbourhood character.' Those who like to slap down this intervention/research will say, 'You're attempting to provide development above the current level.' If well designed, with renewable energy, water harvesting and all of the things that make life more liveable, if you can assemble a precinct you can begin to redirect the amount of space given over to community as distinct from cars.

The challenge is for urban designers and architects to demonstrate what is possible. There are 'missing middle' competitions that have emerged in Queensland and New South Wales governments in the last six months that are encouraging, because you are getting urban designers—over 100 in the case of Queensland—putting in some quite innovative solutions. That begins to signal to local government what is possible. Apart from your capital city municipalities and a small number of others, most really struggle to do significant strategic planning and to have methods of engaging with entire municipalities to convey ideas about where we think this municipality needs to change. It is not universal, but this is where the precision comes in as a result of the studies that you can do. You can begin to pinpoint areas that need to change. They can increase in density. You can do this without losing tree cover and increasing stormwater runoff. That is where the capacity needs to improve. In the small number of projects that we are involved with we embed our researchers into those local governments and provide them with the tools and the training, but there is just not the resourcing to do that with all of the municipalities within a city. So, the question then is: is there a training program that needs to be attached to some of these projects that will allow you to roll that out in an effective way?

Ms BIRD: What is the change to your funding that you referenced earlier where you were worried about the impact on this ability?

Prof. Newton : There are what I class as three urban CRCs—Low Carbon Living, Water Sensitive Cities and Spatial Infrastructure—and I have been fortunate to have been a significant player in all of those, but they are all within about two years of finishing their federal funding, which is really the glue that brings the research community together with the government agencies at all levels as well as private industry. The question is, what is next? The federal government's CRC program has identified about five growth centre topics—cyber, smart manufacturing and so on. Cities, property development and so on, is not in scope. I do not know whether they are really sure as to what can happen in that—

Ms BIRD: Where this will then fall?

Prof. Newton : Where this will fall, yes. Because under those kinds of guidelines or signals those three CRCs would not seem to fit within the federal government growth centres framework that were established under the Abbott government, and they have not changed with the Turnbull government. Those of us in research begin to wonder where we are going to look to get some funding that will last for a period. That is the attraction, in my mind, to CRCs. I have been involved in four over my research career. They provide that length of continuity where you can begin to do something significant.

Ms BIRD: Because they are required to work outside their own bubble.

Prof. Newton : That is true.

Ms BIRD: They are connected to industry.

Prof. Newton : They are end-user driven.

Ms BIRD: Yes.

Prof. Newton : That is how it operates. Sitting on program management, you basically make decisions to fund based on the application of the research.

Ms BIRD: Given the government's program around the smart cities program and the City Deals program, would you see it as logical to have a parallel CRC process that is working with those?

Prof. Newton : Yes, to complement them in areas that they currently are not addressing.

Ms BIRD: Thank you.

CHAIR: We have heard from all three witnesses today about concerns over the ad hoc nature of planning and what role the federal government can have to align the interests of various levels of government. The previous hearing recommended that all infrastructure be master planned and that all infrastructure should be attached to a land use plan; that these two components, when combined, produce maximum uplift of value of land, whether it is for infill or whether it is for strategic decentralisation and, therefore, necessitates a federal value-capture plan model that is overarching and probably the antithesis of the City Deals that seems to be really ad hoc in that it concentrates on three cities at the moment and does not have any real reach.

Prof. Newton : Yes.

CHAIR: Do you see that a federal value-capture model that is driven from the bottom up—because it is the local council working with the state that is going to require the state to put in the infrastructure, and they will then zone around it to protect their neighbourhood from overdevelopment—can contain development to areas around transport hubs, and so they are actually the maker of their own destiny through agreeing or having the initiative to effect greater density. So, it increases the uplift of the value of the land, the federal government collects it and, if they are satisfied that you have master planned and you have a rollout, then the money is yours? Can you see that that could be developed into a plan to have the federal government providing the incentive to align and give greater share of this fiscal imbalance, vertical imbalance and all of those fancy words? I understand what they mean, but I do not necessarily use them all the time. Would that be on the right track or do you have a better suggestion?

Prof. Newton : If you look at the large cities like Melbourne, the really desirable places to live in Melbourne, for example, are the suburbs that were planned and settled up to the Second World War, where you did have integrated planning. You had transport and land use planning happening in combination. That would have been assisted by the existence of the Melbourne Metropolitan Board of Works, which had a mandate for long-term planning, developing a strategy for where infrastructure should be invested for the growth that was anticipated into the future.

CHAIR: Planned.

Prof. Newton : Planned. That is right.

CHAIR: What we so often hear is that we are planning something and I always challenge it and say, 'No. You're coming up with a solution for a problem because there was no plan.'

Prof. Newton : Exactly.

CHAIR: The word 'planning' is misused so often.

Prof. Newton : That is true. The federal government should be looking for metropolitan plans that are demonstrating that connection. Whether that is around activity centres and transport corridors or whether it goes further afield—I would argue that it should go further afield, but that becomes more difficult to assess in the context of a master plan. For the major cities, the major requirement is to provide the missing infrastructure and services to those greenfield areas that were probably developed after the 1980s in the major cities. There is a massive deficit there. The question is, can you provide a better quality of life to people who live there by providing more public transport connecting routes?

Some comments that I heard about the latest Perth metropolitan plan indicate that it is going to be centred on major nodes with rail, light rail network connections or some similar thing. Without giving away a focus on doing infill better in the established areas; because that is where the accessibility and the amenity already is and there is very significant capacity. You have over three-quarters of a million greyfield residential properties already in the established areas of Melbourne suburbs. Do you just allow knockdown and rebuild there or can you encourage something better?

CHAIR: If everybody participates, if you have an alignment with three levels of government, the landowner and the developer—the landowner in this value capture model—is going to get the benefit of the infrastructure that is going in, the rezoning and a higher level of certainly and speed of planning approval. You are giving certainty to the developer.

Prof. Newton : Yes.

CHAIR: You are protecting the landowner from being ripped off by developers.

Prof. Newton : Yes.

CHAIR: But being unaware of the real value of their property, albeit they will pay some contribution to their fellow taxpayers who have funded the infrastructure.

Prof. Newton : Sure, and it is a matter of developer contributions. With this knockdown/rebuild, the small scale, there are no developer contributions, and so the local government has to absorb all of the costs of this low-level intensification. If you have something more substantial with lot consolidation where the property owners will get that 50 to 100 per cent additional return if they can consolidate their properties and become co-designers or co-developers with a developer or else the developer might come in, under the local government guidelines, and the local governments that we are working with will change their building and planning policies to accommodate the innovation that would be associated with a precinct redevelopment as distinct from a knockdown/rebuild. That is where local government can make a contribution.

CHAIR: If you have alignment of the three levels of government and they work together with the idea that the local council will forgo a developer contribution, which increases the value of the land, so the developer is buying something of real value and that the council will be made whole and possibly more by their part of the value capture that is taken at that time of sale, is that a workable plan?

Prof. Newton : That is the area that we are continuing to work on. Our research on regeneration at a precinct scale is doing the feasibility modelling in terms of what is the value capture, what you can put into that precinct, what housing or mixed use you can put into that, and what it will sell for on the market compared to the surrounding area. How can you deliver housing more particularly at a more affordable price? The price point differentials of delivering medium density housing in the middle suburbs is 80 per cent higher than the equivalent per square metre in the greenfields? Why is that? We do not know. I think this is where governments—

Mr WALLACE: Would the cost of building be higher?

Prof. Newton : Is it 80 per cent higher? It is a long time since the federal government did a cost of housing inquiry that really looked at all of the different areas associated with costs.

CHAIR: The inquiry that we did under the economics committee into home ownership clearly brought evidence that was most alarming in regard to investor driven inflation, which is commonly referred to. Yesterday we had comment from our friends that in the Ultimo area precinct of development 98 per cent had been bought by investors. We have a 60-year low in home ownership. We are projected to go to less than 50 per cent of home ownership. These two factors—it is not only supply, it is taming the investor and empowering the homebuyer to stabilise the market. The more home ownership levels, the more stable the market. It is a way of spreading the wealth and so many other benefits. I think that is sometimes overlooked in saying, 'We're going to increase supply and we're going to do densification', but who is getting to buy it and what impact does that have?

Prof. Newton : That is not an area I do research in, but I am across, with my colleagues, the demand side and all that has been in the press. I would agree with that. There are many areas where you could intervene to dampen the investor demand in a more equitable way. I certainly would be encouraging that, but increasing supply in the right areas is also an important focus.

CHAIR: You have concentrated on urban renewal intensification. The committee feels that this could be or should be partnered with a strategic decentralisation where satellite townships, through rapid transport—and where we judge commutes by time, not distance—can further leverage our urban areas and even create sustainable cities in their own right.

Prof. Newton : Precisely.

CHAIR: We talked to a law firm that had 3,000 lawyers, but only 10 per cent of them meet with a client face-to-face over the five days. As to the need to house all 3,000 in the city, they could have an enormous competitive advantage if they could locate their employees in a regional area where their normal daily commute would be only minutes. If they needed to go into the city, it would be only 20 minutes. With their housing and all the work puts under a blanket of infrastructure—schools, health and environment—we actually see an upscaling of quality of life.

Prof. Newton : The introduction to my submission touched on that, and it kind of reprises research that I did as a young scientist in CSIRO on the VFT project in the early 1980s under Dr Paul Wild and Dr John Brotchie. The graph that I have in there is all about which regional cities in Victoria could come into a 30-minute commute. That is the Marchetti constant that we came across at that stage. That seems to be the comfortable travel time for the average. It has not changed over history, and it is technology that allows you to reshape settlement very significantly. The fast train is the primary one in terms of settlement. The high-speed communciations allows organisations to structure their work in any multiple set of ways.

For 35 years I have been a large fan of the role that high-speed rail could take in the settlement shaping of Australia and helping attract population into those centres. So long as they have that fast rail commute, because there are a number of things that you need to do face-to-face, without sitting in a train for an hour and 20 minutes, if that is the time that is currently associated with intercity travel here in Victoria.

Mr WALLACE: You probably have a new No. 1 fan after those comments, I would imagine, from the Chair.

CHAIR: I have always been a fan. Where do you think I got it from?

Mr WALLACE: I do want to pick up on something that you talked about earlier, and this may engender some discussion amongst the committee. You said—unless I misunderstood what you said—that developers are not paying a contribution to headworks charges and so on. That is not the case where I come from in Queensland, where developers are routinely dragged over the hot coals, tipped upside down and shaken vigorously by our local council. They pay very significant contributions, and I mean very significant. Two things, like establishment or hooking into the sewerage system and water system—in Queensland everybody wants a piece of you, with power and everything. All the utilities, the council fees—they all have a crack. I am keen to hear what you say about that, whether that is just something that is peculiar to South-East Queensland. I am also keen to hear, if you accept the premise of what I have just said, which you may not, is that not a form of value capture that has already been paid? I am just cautioning the committee that, when we make our recommendations and look at making great recommendations about introducing value capture on these so-called greedy developers, many of them have already been whacked around the head significantly.

Prof. Newton : My reference was to the small-scale knockdown/rebuild that is occurring in Melbourne; in other words, one property comes on the market, is sold, is subdivided into one for one or subdivided into two for one or maybe three or four to one. To the best of my latest knowledge, that does not attract a contribution from a developer.

Mr WALLACE: It certainly does in Queensland. It is very significant.

Prof. Newton : Maybe this is an important thing to canvass, because the advice that I get from a number of the municipalities that we are working with is that they have not been able to capture that. It is an impost, certainly, on the social infrastructure, because people are looking to have local government provide services apart from connection to a water or sewerage system.

In relation to the water and sewerage systems, that is where the distributed/decentralised models are emerging quite rapidly and are the focal point of research and development in the CRC for Low Carbon, for energy, and CRC Water in terms of water. How can they can play a significant role in precinct regeneration in the brownfields and the greyfields as well as clearly in the greenfields, so these developments are more self-sufficient in terms of their energy, water and treatment of waste streams so you are not putting an extra burden on the existing centralised infrastructures to provide that? It is a matter of where those two things come together. Would it be a hybrid system? If so, how does that emerge? How do you get the engagement between the major centralised infrastructure providers and the businesses that are setting up now to deliver these decentralised services? At the moment, that is where there is a governance issue and clearly where government needs to look at in terms of how that can be best managed with the best possible outcome.

Mr WALLACE: If you were to accept my proposition that in some parts of Australia these very significant contributions are being levied by local government areas, is that a form of value capture?

Prof. Newton : On the part of local government.

Mr WALLACE: Yes, on the part of local government.

Prof. Newton : Clearly, yes.

Mr WALLACE: Thank you.

CHAIR: Thank you for your attendance today. If you have been asked to provide any additional information, would you please forward it to the secretary by Tuesday, 12 September 2017. You will be sent a copy of the transcript of your evidence and you will have an opportunity to request corrections to transcription errors. Thank you again for your attendance. Do not let any agreement with the chairman upset you!

Prof. Newton : I know that this has been your passion, because you answered a question that I asked at one of the CRC Low Carbon forums on fast rail, and I enjoyed your response. Thank you.